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What’s in the Cards for NVIDIA Corporation (NVDA) this Earnings Season?

Here's what our metrics have to say about NVDA's prospects

NVIDIA Corporation (NVDA) is set to report fourth-quarter fiscal 2017 results on Feb 9.

Last quarter, the company posted a positive earnings surprise of 45.61%. Additionally, NVIDIA has surpassed the Zacks Consensus Estimate in the four preceding quarters with an average positive surprise of 24.93%.

Let’s see how things are shaping up for this announcement.

Factors to Consider for NVDA

Widely known for its video gaming chips, NVIDIA has pioneered the art and science of visual computing. With a singular focus on this field, the company offers specialized platforms for the gaming, automotive, data center and professional visualization markets. Its products, services and software deliver amazing experiences in virtual reality, artificial intelligence and autonomous cars.

We believe that NVIDIA’s innovative product pipeline, and strength in gaming and high-end notebook GPUs bode well. We are also optimistic on higher adoption of the company’s Tegra processors.

It is worth mentioning that NVIDIA’s focus on GRID platforms can drive GPU adoption in data centers, giving it an advantage over its competitors. We believe that strong adoption of its GRID enterprise virtual graphics, which improve visual effects in games, will have a positive impact on the company’s overall performance in the fourth quarter.

Additionally, we are highly optimistic about the company’s autonomous business. NVIDIA’s foray into the autonomous vehicles and other automotive electronics space has been driving its revenues and earnings. It should be noted that during the last reported quarterly results, the company witnessed a 68% year-over-year surge in automotive segment revenues, mainly driven by premium infotainment and digital cockpit features in mainstream cars. We expect the trend to continue in the to-be-reported quarter as well.

The company provides various automotive technologies such as digital instrument clusters, navigation, advanced driver-assistance systems and infotainment under its partnership agreement with several automakers including Honda Motor Co Ltd (ADR) (HMC), Tesla Inc (TSLA), Audi, Volvo, Mercedes-Benz and BMW.

We believe these partnerships will aid NVIDIA’s results in the to-be-reported quarter.

Nonetheless, continuous decline in PC sales is a cause of concern for NVIDIA’s GPU segment. Competition from the likes of Intel Corporation (INTC) and QUALCOMM Inc. (QCOM) add to its woes.

Our proven model does not conclusively show that NVIDIA is likely to beat the Zacks Consensus Estimate in its upcoming release. This is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen.

Unfortunately, this is not the case here as elaborated below.

Zacks ESP: The Earnings ESP for NVIDIA is 0.00%. This is because both the Most Accurate estimate and the Zacks Consensus Estimate stand at 84 cents per share. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: NVIDIA has a Zacks Rank #2. Though Zacks Rank #1, 2 or 3 increases the predictive power of ESP, the company’s ESP of 0.00% makes surprise prediction difficult.

We caution against stocks with a Zacks Rank #4 or 5 (Sell rated) going into the earnings announcement, especially when the company is seeing negative estimate revisions.

NVIDIA Corporation Price and EPS Surprise

NVIDIA Corporation Price and EPS Surprise | NVIDIA Corporation Quote

Stocks to Consider Beyond NVDA:

Here are some companies which, as per our model, have the right combination of elements to post an earnings beat this quarter:

Pandora Media, Inc. (P), with an Earnings ESP of +10.81% and a Zacks Rank #3. You can see the complete list of today’s Zacks #1 Rank stocks here.

CenturyLink, Inc. (CTL), with an Earnings ESP of +1.79% and a Zacks Rank #3.

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